‘Govt shouldn’t meddle in capital market’

Chartered Institute of Stockbrokers (CIS) outgoing president and Magnartis Finance & Investments Limited Managing Director Mr Oluwaseyi Abe is an accomplished investment banker with over 20 years’ experience. In this interview with Capital Market Editor Taofik Salako, Abe speaks on the investment environment, the economy and his stewardship, among other issues.

IN the light of recent high-profile infractions in the market, what regulatory and enforcement frameworks have been put in place by the Chartered Institute of Stockbrokers (CIS) as a Self-Regulatory Organisation (SRO) to checkmate abuses and ensure professional integrity?

We have our disciplinary processes that ensure proper handling of complaints and enforcement actions against any erring member. Our processes are robust enough and provide opportunities for all parties to seek redress through transparent disclosures and fair hearing. You must have heard of cases decided in the past by the disciplinary committee of the institute. Our disciplinary framework complements other frameworks that are obtainable on the different platforms across the capital market space. We all have one thing in common; all of us have zero tolerance for infractions because we are obligated to promote and sustain investor confidence.

What will facilitate greater flow of foreign investments into Nigeria?

Foreign investments depend on a lot of things, and all these are what you look at when you are determining the macroeconomic outlook.You know that investors generally – both foreign and domestic – usually look at risks and returns and the risks are basically in the areas of political, legal, monetary management and policy formulation and stability. When you look at our current scenario, we need improved currency regulations, fashioned towards encouraging ease of movement of capital by foreign investors. Our laws on sanctity of contracts must be enforced. We need improved security of lives and properties. We also need workable fiscal and monetary policies to provide the much-needed enabling environment for local and foreign investors at individual and corporate level. So, you will talk about a basket of policies that cumulatively reduce macroeconomic risks.

What’s your assessment of the outlook for the economy?

The outlook is very bright. All the indices are there, and you would have noted that most assessments favour Nigeria. But there are downside risks, things that must be done to unlock the potential of the economy and, which invariably, if left undone, will continue to stifle growth. First, there is the need to depoliticise policy making and implementation, we must downplay the act of reading political meanings to everything. Let’s put professionalism above personal interest, national interest above regional or ethnic interest and do the right thing because it is good for the economy, rather than for politics. Skill and competencies of every professional must be accorded priority without prejudice to the issue of integrity. These are necessary basic variables that can drive economic growth and development. When you get the basics right, it permeates all the other major decisions.

How do you see the regulatory structure at the capital market, especially with the recent happenings at Securities and Exchange Commission (SEC)?

In my personal opinion, the government should reduce involvement in the affairs of our capital market regulators for enhanced independence of these institutions. Capital market regulators, such as SEC, need to be independent of undue influence to play larger roles expected of them in the entire capital market space.

What can be done to encourage companies to list on the stock market?

We must accord priority to investor education with emphasis on the benefits of listing companies on the stock market. Investors must be educated on liquidity generation and risk – return trade-off. Also, there is a need to review listing fees across all platforms to make our stock market attractive and competitive. We must continually create healthy competition among our listed companies through innovative criteria such as corporate governance and shareholder value among others. These will encourage listed companies in the valley of indecision to brace up for outstanding performance. When the listed companies are doing better and the stock market becomes viable linchpin for growth and sustainability, more companies will naturally seek listing. The government can also weigh in with incentives, given that the development of the capital market will rub off positively on the economy.

If you are to offer President Muhammadu Buhari three pieces of advice, what will they be?

I am not a politician. As a technocrat, we have our medium for advising government officials at all levels. President Muhammadu Buhari should weigh the cost-benefit analysis of re-contesting rather than be persuaded by all sorts of people that are clamouring for his re-election for their selfish interest. He should endeavour to live his footprint on the sand of history. There are a lot to still address in the areas of economy and security.

Few Nigerians invest in the capital market and our savings ratio is one of the lowest in the world. What can we do to improve savings and investments?

There should be more enlightenment on savings and investments. On our part as professionals, we should be encouraged to create more financial products. The government should improve on its financial inclusion activities across all strata of the economy to boost savings. This will have multiplier effects on our activities in the financial market. Savings and investments are bedrocks of national economy growth, and the government should galvanise all stakeholders to tackle this problem of low savings and investments.

With many rules and code, is there any fear of overregulation at the capital market?

Rules and regulations are meant to guide human conduct. We need those rules as the market continues to evolve. We cannot operate optimally in the global space without strengthening our regulations. These rules are designed to protect investor and uphold market integrity in the final analysis.

What’s your opinion on the government debt issue and management, especially the background of the recent uproar on debt level and financing?

It is the sure way to go. We must appreciate that the Federal Government has been able to bring down considerably the cost of local borrowings. This is good for the economy. We expect the government to take advantage of the capital market to finance infrastructure projects. It had been done in the past and such opportunities always abound in the capital market. The market has potential to provide funds for long-term projects.

The primary market segment, especially for public offerings and initial public offerings (IPOs), has been largely inactive, despite the rally at the secondary market. What’s responsible for this?

We cannot shy away from the fact that we are just recovering from recession. Economic growth and development are often moderated by recession. Although recession also has its positive impact as it challenges everyone to wear thinking caps on how to get out of it in a better form. Recession encourages creativity. I am sure we will start to see a lot of tractions in this segment, given the fact that we are out of recession. Our economy is improving generally and this should encourage companies to seek opportunities for growth.

How much influence do you think political risk will have on the performance on the capital market as we head for the 2019 national elections?

We have not totally overcome the recent challenges that were brought about by recession. We, therefore, need to thread logically and cautiously. Usually, transition years have their effects on the economy. We must focus on recent gains and achievements and protect same and gun for more, despite the inevitable challenges of globalisation. The stability of the political system and national interest should be paramount in the minds of all the political actors. But I think we should weather it pretty good.

You have just concluded your tenure as the President of the Chartered Institute of Stockbrokers (CIS), what are the highpoints of your achievements? What are the challenges and what would have done differently? What are your pieces of advice for your successor?

We have been able to refocus and reposition the institute greatly. We have returned the institute into profitability, though there is room for improvement. We got our council’s approval to confirm Honorary Fellowship on four eminent Nigerians for the first time in the history of the institute. This allowed us to invite prequalified prominent Nigerians to be part of us as stockbrokers under the Honorary Fellowship provision. At 25, the institute acquired a befitting secretariat at highbrow Ikoyi area of Lagos, this is in spite of our challenging operating environment. We have also commenced the Specialised Professional Certification (SPC), which provides for specialisation and allows professionals to acquire practice licence in a particular area.This is in line with global best practices to encourage specialisation.

We have increased awareness through ”Operation Catch them Young’ by partnering tertiary institutions. We have recorded significant improvements in members’ participation in the institute’s functions, an indication of renewed confidence. We have re-launched the Nigerian Stockbroker Magazine. We have held successful national workshops that received Federal Government’s nod. With all humility, I can say we have done well. Our successes are also predicated on the support from stakeholders. It is a collective effort and I have no doubt that my successor will keep the flag flying.

Where do you see stockbroking in Nigeria in the medium- to long-term? Relatedly, how will the enlarged scope of CISI bill impact the capital market?

CIS has built an enviable profile as a force to be reckoned with. Quite a lot of people are showing interest in our affairs. Going forward, we are on a better pedestal to play our advocacy roles in the economy. The CISI Bill will unite all players and professionals in the entire financial market by putting everyone under the same monitoring radar. This will enhance cooperation and sanity in the market. With this, there will be a more cohesive regulatory system for all professionals, which should impact positively on the operations of the capital market.

What strategy is being put in place by the market operators to woo back investors into the market?

It is a multi-faceted approach: first, the investors must be educated that our market has recovered, and that current price swings are normal. The Nigerian Stock Exchange (NSE) must fashion out a policy that encourages the licencing of more stockbroking firms to operate in the remote states and towns. Corporate governance at all levels must be significantly enhanced.The government also has a role to play in providing liquidity to stabilise the market. Finally, efforts should be stepped up to revitalise the primary market and promote new listings of local and foreign firms.

CIS at 25. What is the institute’s major request from the administration of President Muhammadu Buhari?

In formulating economic policies, the potential impact on the capital market should be a key consideration. Some of the issues we will also want the administration to give utmost attention to include financing of major infrastructure projects through the capital market, thereby moving from a largely bank-based to a capital market-based financing model. The government must support capacity building initiatives by funding appropriate professional groups such as CIS to carry out the task. The government should provide a buffer stabilisation funding arrangement for the capital market.This can be done through the Asset Management Corporation of Nigeria (AMCON), for instance. The government should also put in place policies aimed at channelling more savings and investments into the capital market. For instance, the government should encourage pension funds, through the National Pension Commission (PENCOM) to invest more in the stock market. It should also provide appropriate incentives and legislation for companies to list, especially those in the major sectors of the economy.

What is your advice to the investing public?

The public should be assured that the capital market has fully recovered and it is on the path of surpassing our previous high points. Domestic investors should, therefore, take advantage of emerging opportunities. However, investors need quality advice from qualified professionals. The investing public should work with reputable stockbrokers. For the teeming young Nigerians who wish to become finance and investment professionals, the time to take action is now. CIS certifications will open doors of opportunity to you, as they are some of the most attractive in the country, especially now that activities in the capital market are booming once more.

You recently announced scholarship for capital market correspondents to undertake professional studies and possible certifications under the CIS, what informed this?

We believe the press is our partner in progress. It is in pursuance of our institute’s capacity building that the Governing Council endorsed the scholarship. The capital market has evolved over the years and the role of the financial press cannot be underestimated. The market is dynamic and there is a need to empower the press by ensuring that they understand the dynamics of the market to report the market professionally. We believe this will be to the advantage of the market.